Business valuation in divorce

How do you value a business for purposes of a divorce in Virginia?

When parties to a divorce are business owners, the property division aspects of divorce are much more complex and complicated.  In such a scenario, a reliable business valuation must be performed by a certified public accountant (CPA) in order to determine the value of the business for equitable distribution purposes, because the business may have value independent of the other marital assets.  Furthermore, a CPA is also required to determine the income of the self-employed spouse(s) for spousal support considerations.  Self-employed individuals, such as doctors, lawyers, and accountants who operate their own practices, as well as other business persons and professionals who operate their own businesses, must be prepared to account for all of their income and assets in a divorce.  The issue of determination of income of a self-employed individual can be very complicated, and often adds greatly to the complexity of a divorce proceeding.  To discuss the challenges and best practices in business valuation in divorce, as well as the determination of income for self-employed persons in a divorce scenario, contact us for a consultation.

What factors are considered in valuing a business in a divorce?

The significance of a business valuation in a divorce case will be affected by a number of factors, including, but not limited to, the following:

  • Whether the business was started before or during the marriage.
  • The contributions, both monetarily and non-monetarily, of each spouse to the business.
  • How the fair market value or the adjusted book value over time of a business that is just getting started is determined.
  • What business valuation technique(s) are used in valuing the business.
  • The assets and liabilities of the business, including any tax liabilities.
  • The effect of earnings capitalization, prior sales, and excess earnings on business valuation.

When parties to a divorce are business owners, it is necessary to work with forensic accountants who apply sophisticated accounting and financial theories in business valuation cases.  At The Reed Law Firm, we work to translate these complex calculations into terms that our clients, mediators, and judges can understand.  To learn about the various aspects of business valuation in divorce, and to discuss how the value of your or your spouse’s business is likely to impact a property settlement agreement, or a contested divorce litigation, contact us to schedule a consultation.